New Facts Argue Apple Payments May Be Closer than Thought

It appears the question is no longer whether Apple will break into mobile payments but when. A payments-related patent application recently surfaced that indicated Apple is quite serious — at least over the long term — about mobile payments. After all, it’s a natural for the company. Yesterday the Wall Street Journal reported additional details that indicate Apple may be preparing to enter the market sooner rather than later. Here are some of the key facts from the story:

• Eddy Cue, Apple’s iTunes and App Store chief . . . has met with industry executives to discuss Apple’s interest in handling payments for physical goods and services on its devices, according to people familiar with the situation.
• Apple moved Jennifer Bailey, a longtime executive who was running its online stores, into a new role to build a payment business within the technology giant, three people with knowledge of the move said.

These moves don’t guarantee Apple will enter the space but they’re strongly suggestive of it. Apple has roughly 600 million consumer credit cards on file in iTunes. It also has a consumer trust advantage over other competitors in the segment. (Wall Street would celebrate an Apple move into payments.) Apple’s fingerprint sensor could become a key security feature of a Pay with iTunes/iWallet service. However there’s considerable complexity still “on the back end” with real-world retailers and merchants and their POS systems. Retailers also have their own mobile payments initiative, which could create resistance to Apple just as carriers supporting ISIS have resisted or blocked Google Wallet. Those factors would probably limit the immediate availability of an Apple payments solution for goods at major retail stores, though not necessarily at places such as QSR and fast-casual restaurants. It would be technically easier for Apple to enter e-commerce and create a PayPal or Pay with Amazon competitor. Perhaps most likely, however, Apple could enable app developers to incorporate a Pay with iTunes capability, which would in turn enable payments for offline services (AirBnB, Uber, Dash, etc.). This is where “mobile payments” has traction today — in specific apps or “vertical” contexts with a stored credit card. Apple’s Passbook app would probably get merged into or incorporate any Apple payments program. I would also expect that iBeacon (BLE) would be tied in to an Apple payments solution (as with PayPay Beacon). All this potentially adds up to a very powerful set of related capabilities including location awareness/indoor location, couponing/loyalty and in-app payments (for e-commerce and offline services). An Apple payments service could also operate as a meaningful differentiator vs. Android handsets for both app developers and consumers. Google Wallet’s offline payments capabilities have so far failed to catch on. I also wouldn’t be surprised if Apple made one or more (high profile) acquisitions before launching payments to bolster technical capabilities. Google would probably be motivated to compete for some of the same acquisitions — for its own sake and/or to keep them away from Apple. In the near term, a comprehensive mobile payments solution will probably require a hybrid approach to offer merchants and consumers a couple of ways to accept mobile payments and to pay. And while mobile payments have yet to gain mainstream adoption, Apple is one of the few companies that could really accelerate the market.